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By Alex Cherner ’19
Blockchain is largely known as a decentralized, distributed ledger that underlies and enables most cryptocurrencies and digital token systems, such as Bitcoin and Ethereum. A blockchain is a growing list of records that are linked using cryptography, and it is resistant to modification of these records.
In his “Making Blockchain Real--Charting a Course to Generating Business Value” presentation, Tim Grant demystified blockchain technology and offered digestible insight on the tech’s use as a business solution.
Grant opened his discussion on the subject by informing the audience that we are in the beginnings of a fourth industrial revolution that he defined as the “confluence of emerging technologies.” Grant stated that blockchain is going to help form the foundation of the next-generation financial services infrastructure, and he broke down the shift from centralized to decentralized storage of data and information. He defined the relationship between cryptocurrencies, blockchains, distributed ledgers, and ledgers, and then walked through the timeline of the brief history of the technology (from cryptocurrencies and ICOs to tokens and tokenomics). His conclusions on tokens and tokenomics are that the regulatory framework for ICOs is rapidly evolving, the ICO framework for capital raising is logical, and institutional tokens will develop in the near future.
Grant went into further detail on distributed ledgers, which form the backbone of the use of blockchain for business purposes. Distributed ledgers have cryptography to ensure identity authentication for each transaction, immutability to preserve integrity of data and create an audit trail, and smart contracts for the automatic execution of business logic when certain criteria are met. The ledgers function as shared ledgers so that each participant sees the same view of the same data, and they are updated in real time and subject to permissioning. Finally, and perhaps most importantly, these ledgers have distributed consensus to ensure the state of the ledger represents the agreed-upon truth of all stakeholders.
One of the most significant takeaways from the talk was the discussion on the transformational potential of blockchain technology between two entities from a business standpoint. Prior to the internet, a single entity would commit an “action,” perceive, process and communicate that action internally, and then physically communicate the action to another entity, which would also perceive, process, and communicate the action internally. The internet has disrupted this form of transaction and communication between two entities. Grant explained that currently, actions are perceived and processed internally, and then communicated in a shared space known as the internet. The decentralized nature of blockchain technology further impacts how business between multiple entities is done--the tech will allow actions to be both perceived and processed in shared space before they are communicated through the internet.
Grant gave a brief overview of the competitive landscape specific to real estate’s use of blockchain technology, pointing out that there are over 50 identified real estate blockchain applications and $400mm in funds raised to explore blockchain in real estate initiatives. He suggested that asset-backed tokens could very well represent ownership of real property. An asset-backed token is a digital token based on blockchain technology that signifies and derives its value for something that does not exist on the blockchain but instead is a representation of ownership of a physical asset (e.g. real estate).
Grant concluded his talk by emphasizing the fact that the powerful technology of blockchain can be used to record and safely store practically anything of value – it is an unchanging record of any type of information and is at the infancy of disrupting the global financial industry.
Alex Cherner is from Bethesda, Maryland, and graduated from Washington University in St. Louis in 2014 with a BA in Psychology. After graduation, Alex joined AOL., where he worked in strategy for two years. Following AOL, he joined the venture capital arm of 1776, where he worked on the investments team. Alex is a second-year student at Columbia Business School pursuing opportunities in commercial real estate investment. He spent his summer on the Office Development team at Brookfield Properties in New York.